TLDR
- Sky (formerly MakerDAO) joins bidding war to power Hyperliquid’s USDH stablecoin with $8 billion balance sheet
- Five major crypto protocols now competing: Sky, Paxos, Frax, Agora, and Native Markets
- Sky offers 4.85% yield on USDH holdings and $25 million investment in Hyperliquid ecosystem
- Hyperliquid holds $5.5 billion USDC deposits, making this one of DeFi’s most valuable contracts
- Validators will vote on proposals after network upgrade, with decision determining USDH structure
Hyperliquid has sparked a major bidding war in the crypto space as five protocols compete to power its planned USDH stablecoin. The decentralized exchange holds $5.5 billion in USDC deposits, representing about 7.5% of that stablecoin’s total supply.
USDH powered by Sky
The best stablecoin offers so much more than just a stable medium of exchange – it should also deliver highly efficient returns, generated by actively developing, building and growing the ecosystem it lives in.
By using Sky to power USDH, the Hyperliquid…
— Rune (@RuneKek) September 8, 2025
Sky, formerly known as MakerDAO, entered the competition Monday with a proposal leveraging its $8 billion balance sheet. The protocol already backs $12.5 billion worth of stablecoins through USDS and DAI, making it the fourth and fifth largest stablecoin issuers.
Sky co-founder Rune Christensen outlined terms including 4.85% returns on all USDH held on Hyperliquid. This rate exceeds current Treasury bill yields, with revenue directed toward HYPE token buybacks and the platform’s Assistance Fund.
The proposal includes $2.2 billion in instant redemption liquidity through Sky’s Peg Stability Module. This feature allows large traders to convert USDH at scale without delays.
Sky also promises a $25 million investment called “Hyperliquid Genesis Star” to bootstrap DeFi development on the platform. The protocol plans to migrate its native buyback engine, which generates over $250 million annually, onto Hyperliquid.
Competition Heats Up
Paxos has pledged 95% of reserve earnings to HYPE buybacks alongside zero-fee USDC migration. The established stablecoin issuer brings regulatory compliance expertise to its proposal.
Frax positioned itself as community-focused, offering a wrapper model where 100% of Treasury yield flows directly to users. This approach contrasts with Sky’s platform-revenue sharing model.
Agora entered with backing from State Street, VanEck, and MoonPay. The firm promises 100% of net revenue for HYPE buybacks while emphasizing its neutral stance in the ecosystem.
Native Markets faces community pushback over potential conflicts of interest. The venture, backed by Stripe’s Bridge payment processor, has drawn criticism due to Stripe’s ownership of wallet provider Privy and its Tempo blockchain project.
High Stakes Decision
Hyperliquid processed nearly $400 billion in trading volume last month, demonstrating the platform’s scale. The USDH contract represents one of DeFi’s most valuable opportunities given the exchange’s deposit base.
Validators will vote on proposals following the network’s next upgrade. The Hyperliquid Foundation plans to abstain from voting, leaving the decision to community validators.
VanEck CEO Jan van Eck made a public appeal Monday supporting Agora’s bid. Van Eck, whose son Nick co-founded Agora, wrote that his firm wants to contribute to Hyperliquid’s ecosystem while warning against being “gang-tackled” by competitors.
Dear Hyperliquid community,
We are impressed by your product, the technology, the decentralized governance, and the method of your rollout.
And we think we can be part of a trusted, compliant solution.
We provide research to the community, for free, in an effort to be…— Jan van Eck (@JanvanEck3) September 8, 2025
Each proposal offers different structures for USDH, from Genius Act compliance to user-yielding models. The winning bid will determine whether Hyperliquid’s monetary layer connects to an established DeFi protocol or a traditional financial services firm.
The competition continues as Ethena hints at submitting its own proposal. Validators face a crowded field when voting begins in the coming days.
